US Stocks Climb, Boosted By Manufacturing, Construction Data

KristinaPeterson

NEW YORK (MarketWatch) -- U.S. stocks climbed Monday, after manufacturing activity hit its highest level since July 2004 and construction spending unexpectedly increased.

The Dow Jones Industrial Average was ahead 85 points, or 0.8%, to 11093 in recent trading. The measure's most economically sensitive components jumped to the top. Caterpillar led with a 2% increase, while General Electric rose 1.9%. Boeing was the measure's strongest performer, up 2%.

Weighing on the measure, Pfizer eased 0.4% after the U.S. Supreme Court on Monday rejected an appeal by the drug maker that sought to thwart a securities lawsuit alleging Pfizer misrepresented the safety profile of the blockbuster pain drug Celebrex.

Materials weakened after the People's Bank of China said Sunday it was raising its reserve requirement ratio by 50 basis points. Investors fretted that China's moves to cool a growing economy could hurt companies with significant operations selling building materials and other products to China. Alcoa tumbled 2.7%.

The Nasdaq Composite climbed 0.9%. The Standard & Poor's 500-share index advanced 0.7%, led by its industrial and consumer-discretionary sectors.

Helping to lift sentiment, the Commerce Department said Monday that U.S. construction spending rose by 0.2% in March, when forecasters had expected a 0.5% decline. March's climb was the first time construction spending rose in five months.

The Institute for Supply Management said Monday that its index of manufacturing activity had a solid month, coming in at 60.4, from 59.6 in March and 56.5 in February. The March level was the measure's best performance since July 2004 and slightly exceeded expectations.

Financials also erased some of their losses from Friday, when the sector plummeted as concerns swirled around federal prosecutors' decision to open a probe of Goldman Sachs and how that could affect other banks. On Monday, Goldman Sachs was back in the black, up 2.8%.

Meanwhile, Greece agreed on Sunday to a EUR110 billion ($146.5 billion) bailout from euro-zone countries and the International Monetary Fund in return for stringent budget cuts. The bailout removes the worry that Greece won't meet its immediate funding needs due May 19, but introduces fresh questions, among them whether the country can bear the harsh budget-cutting measures that have raised ire within Greece. Concerns lingered about whether the crisis could spread to other nations within the euro zone.

"It is seen as a cautious positive. I don't think anybody thinks that the job is done," said Mike Shea, managing partner at Direct Access Partners, but he noted that the situation has greater clarity than it did two weeks ago. The market is focusing more on the positive trend from recent data and earnings, he said.

"If you take all this data as a six-month bushel-full of data, you'll see that there's a theme there and that's that things are getting a little better," Shea said.

In a widely anticipated deal that lifted the airline sector, Continental Airlines and United Airlines parent UAL confirmed an all-stock tie-up to form the world's biggest air carrier, surpassing Delta Air Lines. Assuming the deal clears antitrust hurdles, the new airline would be based in Chicago. Shares of Continental gained 1.6%, while United rose 2.8% and Delta advanced 3.3%.

Among companies reporting earnings, Clorox slid 2.2% after its fiscal third-quarter earnings rose 7.8% as the consumer-products company reported sales volume continued to improve, but Venezuela's currency devaluation earlier this year weighed on the top line.

Apple rose 1.9% after announcing iPad sales topped one million on Friday, after 28 days of sales. The company also said it plans to close its Lala.com online music service at the end of May, a move prompting speculation that the iPhone maker might soon launch a new Web-based version of its iTunes music store.

The dollar strengthened against both the euro and the yen. The U.S. Dollar Index, which tracks the U.S. dollar against six other currencies, gained 0.6%. Treasurys declined, with the 10-year note down to push yield up to 3.70%. Meanwhile, oil prices climbed above $86 a barrel, supported by uncertainty over the path of the oil spill in the Gulf of Mexico. Gold futures also rose.

In other economic data, the Commerce Department said Monday that U.S. consumer spending rose twice as fast as income in March, with personal income up 0.3% and spending up 0.6%, in line with the expectations of economists surveyed by Dow Jones Newswires. The personal savings rate slid to 2.7% from 3% the previous month, now at its lowest level in 18 months.

The core price index for personal consumption spending, among the inflation indicators most closely watched by the U.S. Federal Reserve, advanced 0.1% in March.

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